Performance Drivers of the Opalesque Emanagers Index
This month we examine the performance drivers of the Emerging
Managers Index by treating it as if it were a portfolio or fund of funds
and performing an attribution analysis on the constituent sub-indices
mapped to the Dow Jones Credit Suisse Hedge Fund Strategies.
The results are instructive and give a fairly clear indication as to where
the excess performance of the Emanagers Index has come from.
Over the 3.25 year period since Jan 2009 the Emanagers index has
delivered a +14.7% compound annual return (CAGR ) versus the +8.91%
of the benchmark Dow Jones Credit Suisse Blue Chip Hedge Fund
To the extent that the Index is a semi-passive portfolio whose Strategy
Asset Allocation is largely determined by market forces one might
expect that there would be a significant Allocation or market timing
effect driving returns. However, this is not the case for the Emanagers
Index and the allocation effects relative to the benchmark portfolio are
in fact -1.74% p.a. This probably reflects the lagged momentum effect
of new funds being launched in recently strong performing areas.
In contrast the Selection effect is +4.18% p.a. suggesting a high quality
of funds coming into the index and that it is not merely dominated by
The Emanagers index has significantly higher weightings to Managed
Futures ( 30.4% v.s. 16.4), Equity L/S ( 33.9% v.s. 15.9%) and
significantly lower weightings in Event Driven ( 3.5% v.s. 21.4%) and
Emerging Markets ( 0% ) and Convertible Arbitrage.
Emerging Manager Strategy weights versus Benchmark
To view our full article please login
This article was published in Opalesque's New Managers
a top-down monthly analysis, news and research publication on the global emerging manager space.